* Gold shrugs off Spain downgrade, as euro recovers
SINGAPORE, Oct 14 (Reuters) - Gold was slightly higher on
Friday and headed for its biggest weekly gain in more than a
month, shrugging off the credit rating downgrade of Spain ahead
of a G20 meeting whose agenda will be dominated by the euro zone
debt crisis.
Ratings agency Standard and Poor's downgraded the long-term
credit rating of Spain by one notch on Friday, just as finance
ministers and central bank governors get ready to pressure
Europe to act swiftly to tackle its financial woes at a weekend
meeting.
The euro reversed early minor losses and edged higher
against the dollar, as investors remained confident European
policymakers will be able to contain the debt crisis.
"The bar is very high for Europe credit news to be
considered 'bad' beyond what is priced in," said a
Singapore-based trader.
"My sense is that a lot of premium has been spent and cash
hoarded insuring against the worst-case scenario.
"
Spot gold inched up 0.3 percent to $1,671.80 an ounce
by 0633 GMT, on course for a rise of 2.1 percent from a week
earlier, its biggest weekly gain since early September in the
run-up to a record above $1,920.
U.S. gold <GCcv1> also gained 0.3 percent to $1,673.50 an
ounce in thin volume.
On the spot gold chart, the 5-day moving average was close
to cross above the 20-day moving average.
UBS LOWERS 2011 GOLD FORECAST
UBS reduced its 2011 average gold price to $1,615 from
$1,665 to allow for mark-to-market adjustments and the impact of
a stronger dollar, but kept its 2012 forecast at $2,075.
"Our core view is that ongoing global macroeconomic
disappointments, the inevitability of further negative turns in
the European sovereign debt crisis, and low business, consumer
and investor confidence will lead to gold being increasingly
used as the line of defence against negative market outcomes,"
the bank said in a research note.
The most serious risk to gold is a rapid deterioration in
bank funding and escalating liquidity concerns, it added.
The bank said its physical gold sales to India so far this
year rose 10 percent on the year, suggesting resilient buying
interest in the world's biggest gold consumer in the face of
higher prices.
Besides physical gold, Indians are likely to invest more in
gold-backed exchange-traded funds, as a sagging stock market
disappoints and high inflation eats into savings, the World Gold
Council said.
China, the world's second-largest gold consumer and biggest
gold producer, said its inflation in September eased from the
previous month, but the stubborn food price pressures will deter
the central bank from loosening its policy any time soon.
High inflation has driven many retail investor in China to
bullion, which his seen as a good hedge against rising prices.
Spot platinum gained 0.6 percent to $1,537.49,
posting its biggest weekly rise in about two months of 3.2
percent, snapping five weeks of consecutive losses.
Precious metals prices 0633 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1671.80 5.60 +0.34 17.78
Spot Silver 32.01 0.26 +0.82 3.73
Spot Platinum 1537.49 9.76 +0.64 -13.01
Spot Palladium 597.97 8.09 +1.37 -25.21
TOCOM Gold 4137.00 -10.00 -0.24 10.94 44213
TOCOM Platinum 3832.00 -20.00 -0.52 -18.40 13653
TOCOM Silver 78.70 -0.80 -1.01 -2.84 459
TOCOM Palladium 1495.00 -11.00 -0.73 -28.71 301
COMEX GOLD DEC1 1673.50 5.00 +0.30 17.74 12969
COMEX SILVER DEC1 32.07 0.40 +1.26 3.64 3496
Euro/Dollar 1.3804
Dollar/Yen 76.92
TOCOM prices in yen per gram. Spot prices in $ per ounce.
COMEX gold and silver contracts show the most active months
(Editing by Miral Fahmy)